Australian Broker Call

Credit Suisse rates API as Downgrade to Underperform from Neutral (5) -

Australian Pharma has risen 29% since the Clearskincare acquisition, Credit Suisse notes, simply on multiple expansion. This is despite an increasingly challenged operating environment in which both PBS and retail revenues are under pressure.

The broker expects current 16.6x forward PE to compress following the company's October result release when focus on the challenging environment is renewed. Downgrade to Underperform from Neutral, target falls to $1.55 from $1.63.

Target price is $1.55 Current Price is $1.73 Difference: minus $0.18 (current price is over target).
If API meets the Credit Suisse target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in August.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates AWC as Outperform (1) -

While alumina spot prices have softened in the past week, they remain at a "lofty" $559/t, the broker notes. Tailwinds are expected to continue in the second half with 50% of Alunorte production curtailed and China set to restock ahead of winter shutdowns.

It's a perfect storm for Alumina (the company), the broker suggests, with Alcoa margins at historical highs, costs set to reduce on operational leverage and forex moving favourably. The only immediate risk lies with the union dispute in WA which is yet to be resolved.

Outperform and $3.10 target retained.

Target price is $3.10 Current Price is $2.74 Difference: $0.36
If AWC meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $3.22, suggesting upside of 17.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.7

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates AWC as Outperform (1) -

Macquarie updates its commodity price outlook, with the most significant changes being a material improvement in the alumina price. While the earnings outlook for Alumina Ltd is improved, the broker's near-term forecasts do not factor in any impact from the labour disputes in Western Australia.

The stock offers leading dividend yields over the next three years and remains a preferred pure play bulk commodity miner. Outperform retained. Target is raised to $3.60 from $3.00.

Target price is $3.60 Current Price is $2.74 Difference: $0.86
If AWC meets the Macquarie target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $3.22, suggesting upside of 17.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.7

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates CHC as Upgrade to Overweight from Underweight (1) -

Morgan Stanley envisages upside for Australian property stocks over the next 12 months. The broker focuses on those with better risk-adjusted returns and more visible catalysts. The broker envisages more than 10% upside to the real asset business of Charter Hall.

Rating is upgraded to Overweight from Underweight. Strength in retail flows, ongoing execution and accelerating earnings growth in FY19 and FY20 are the factors driving outperformance. Target is raised to $7.60 from $6.95. Industry view is Cautious.

Target price is $7.60 Current Price is $7.19 Difference: $0.41
If CHC meets the Morgan Stanley target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $6.85, suggesting downside of -4.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates EVN as Outperform (1) -

Macquarie reduces gold price forecasts which translates to material reductions to earnings estimates. Recent falls in share prices have largely captured the impact of the downgrades so recommendations are unchanged.

Evolution Mining remains among the broker's preferred picks in the gold sector for producers. Outperform rating maintained. Target is reduced to $3.00 from $3.30.

Target price is $3.00 Current Price is $2.71 Difference: $0.29
If EVN meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $3.00, suggesting upside of 10.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates IGO as Downgrade to Underperform from Neutral (5) -

Macquarie has downgraded gold price forecasts which affects Independence Group's earnings materially and the rating is downgraded to Underperform from Neutral. The broker retains a preference for Western Areas ((WSA)) in nickel.

Incorporating changes to nickel price forecasts and the AUD/USD profile also translates to a -20% cut to the company's FY19 earnings estimates. Target is reduced to $4.20 from $4.70.

Target price is $4.20 Current Price is $4.58 Difference: minus $0.38 (current price is over target).
If IGO meets the Macquarie target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.66, suggesting upside of 1.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.2

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates MWY as Buy (1) -

Midway has confirmed a number of projects will be finalised in coming weeks. The company will invest around $17m in new infrastructure in the Tiwi Islands, expected to result in higher annual production and export of wood fibre. Ord Minnett assumes capital deployment and construction takes place in the second half of FY19 as the wet season is approaching.

The company will also invest around $9m in the processing, logistics and marketing of wood fibre for a clean energy biomass project in Western Australia. The broker updates estimates for both projects and raises the target to $3.91 from $3.65. Buy rating maintained.

Target price is $3.91 Current Price is $3.01 Difference: $0.9
If MWY meets the Ord Minnett target it will return approximately 30% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates NHC as Downgrade to Neutral from Outperform (3) -

A weaker Australian dollar is offset by an increase in Macquarie's coal price forecasts. The broker downgrades New Hope to Neutral from Outperform. Target is steady at $3.80.

Target price is $3.80 Current Price is $3.80 Difference: $0
If NHC meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $3.14, suggesting downside of -17.5% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates NSR as Reinstate Coverage with Overweight (1) -

Morgan Stanley envisages upside for Australian property stocks over the next 12 months. The broker focuses on those with better risk-adjusted returns and more visible catalysts.

The broker reinstates coverage with an Overweight rating. Target is $1.85. Industry view is Cautious.

Target price is $1.85 Current Price is $1.66 Difference: $0.19
If NSR meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $1.56, suggesting downside of -6.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates S32 as Outperform (1) -

South32 delivered a result last month that featured a beat on earnings and costs, the broker notes. If the broker applies current spot pricing to commodity assumptions a value of $5.04 is attained. Applying its own new forecasts, which see coal prices rise and zinc fall, the broker arrives at a new target price of $4.35, up from $4.10.

The broker retains Outperform, noting South32 has the best commodity mix under coverage other than Alumina ((AWC)).

Target price is $4.35 Current Price is $3.93 Difference: $0.42
If S32 meets the Credit Suisse target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.05, suggesting upside of 3.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.6

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates SGM as Outperform (1) -

Yesterday Credit Suisse noted it was unclear whether Sims' profit warning with regard its SAR JV was due to the impact of competition or weak scrap prices. The company has since provided more detail, noting firstly that the downgrade is all about SAR -- the rest of the company is on guidance -- and secondly that the bulk of the downgrade is due to weak scrap flows into SAR because of weak prices.

Only a small proportion is due to a collapse in Zorba prices. The company will now implement Zorba-washing to improve grades and thus sales, while the scrap flow issue is seen as temporary.

Outperform and $14.45 target retained.

Target price is $14.45 Current Price is $12.12 Difference: $2.33
If SGM meets the Credit Suisse target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $14.48, suggesting upside of 19.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates TLS as Sell (5) -

Citi analysts are changing their valuation approach, separating the infrastructure parts from telecommunication services. This leads to an increase in valuation, which pushes up the price target to $2.65 from $2.30.

Citi nevertheless sticks to its Sell rating, still convinced that Telstra won't be able to generate sufficient cash flows to maintain a 22c dividend longer term. The analysts also observe price competition in mobile is rising, suggesting Telstra cannot maintain its current 30% price premium (or market share losses will follow).

On current forecasts, Telstra's dividend is projected to fall to 16c this year, and to 11c by FY21.

Target price is $2.65 Current Price is $3.20 Difference: minus $0.55 (current price is over target).
If TLS meets the Citi target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.14, suggesting downside of -2.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.1

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates VCX as Downgrade to Underweight from Overweight (5) -

Morgan Stanley envisages upside for Australian property stocks over the next 12 months. The broker focuses on those with better risk-adjusted returns and more visible catalysts.

While the broker still envisages further upside for Vicinity Centres this is expected to take time to deliver. Moreover, recent commentary by retailers, citing a desire for smaller stores in more convenient locations, indicates an increasingly challenged landscape for landlords.

Consequently, Morgan Stanley downgrades to Underweight from Overweight. Target is steady at $2.85. Industry view: Cautious.

Target price is $2.85 Current Price is $2.66 Difference: $0.19
If VCX meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $2.91, suggesting upside of 9.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Deutsche Bank rates VEA as Buy (1) -

Deutsche Bank analysts note Viva Energy Group has been notified by Viva Energy REIT ((VVR)) it is liable for $31.2m relating to the transfer of properties shortly prior to the Viva Energy REIT IPO according to State Revenue Office (SRO).

Viva Energy Group is liable for this amount under the initial arrangements made prior to the separation and listing of the REIT. Viva Energy Group has indicated it will contest the position of the State Revenue Office and will lodge an objection to the Commissioner of State Revenue.

In the meantime, Deutsche Bank does not change its Buy rating or $2.65 price target.

Target price is $2.65 Current Price is $2.32 Difference: $0.33
If VEA meets the Deutsche Bank target it will return approximately 14% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates VOC as Buy (1) -

Increased confidence in the long-term earnings recovery story at Vocus is guiding the price target upward by 7% to $3.65, explain the Citi analysts. They also observe valuations for telcos are rising across the globe.

Earnings estimates changes put in place remain rather modest; 2-5% across FY19-FY21. Citi notes Vocus remains the only large cap telco in Australia that is actually offering revenue growth. Buy rating retained.

The company is expected to resume paying dividends in FY20.

Target price is $3.65 Current Price is $3.15 Difference: $0.5
If VOC meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $2.86, suggesting downside of -9.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.1

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates WEB as Equal-weight (3) -

Morgan Stanley struggles to envisage any upside for Webjet after noting soft peak summer demand at Thomas Cook. Webjet acquired Thomas Cook's "sun and beach" complementary hotel contracts in 2016.

The broker also considers the company's disclosures on B2B are opaque after it changed the reporting of the segment to be "by geography".

Equal-weight. Target is $16.60. Industry View is In-Line.

Target price is $16.60 Current Price is $15.36 Difference: $1.24
If WEB meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $17.41, suggesting upside of 13.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.2

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates WES as Sell (5) -

Citi analysts are suggesting Coles' successful Little Shop promotion has temporarily interrupted sales momentum at Woolworths' ((WOW)) expense, but momentum will swing back into the latter's favour.

Citi appears convinced Coles won't be able to capitalise on H1 momentum into H2, with Woolworths expected to recapture sales momentum. Price target improves to $46.30, but Sell rating retained.

Target price is $46.30 Current Price is $49.53 Difference: minus $3.23 (current price is over target).
If WES meets the Citi target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $47.46, suggesting downside of -4.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates WHC as Upgrade to Outperform from Neutral (1) -

Whitehaven Coal's share price has recently come off the boil after a stellar run post-result, Credit Suisse notes. The broker has upgraded coal price assumptions, driving material earnings upgrades. Credit Suisse reminds that the company is a cash generating machine that at current spot prices, could buy itself back in under six years.

At the very least Whitehaven could afford to double its dividend, the broker points out. Upgrade to Outperform from Neutral. Target rises to $6.00 from $5.10.

Target price is $6.00 Current Price is $5.48 Difference: $0.52
If WHC meets the Credit Suisse target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $5.72, suggesting upside of 4.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.7

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates WOW as Upgrade to Buy from Neutral (1) -

Citi analysts are suggesting Coles' ((WES)) successful Little Shop promotion has temporarily interrupted sales momentum at Woolworths' expense, but momentum will swing back into the latter's favour.

Better execution and management stability will allow Woolworths to return to like-for-like sales growth leadership in H2 FY19, predict the analysts. Target retained at $32 but following share price weakness the recommendation is upgraded to Buy from Neutral.

Target price is $32.00 Current Price is $28.11 Difference: $3.89
If WOW meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $28.53, suggesting upside of 1.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.1

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates WPL as Neutral (3) -

Total has announced the successful appraisal of the Shwe Yee Htun-2 well in Myanmar. The well intersected 40m of net pay and a high-quality reservoir. Macquarie expects these initial results to provide upside to the existing resource base in Woodside's 2018 result.

The broker values the current resource at around US$150m (unrisked) with a 5% risking because of early stage exploration. Neutral maintained. Target is $35.40.

Target price is $35.40 Current Price is $38.56 Difference: minus $3.16 (current price is over target).
If WPL meets the Macquarie target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $36.61, suggesting downside of -5.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources